Episode 46: The Future of Digital Marketing

In this episode of Strategy Talks, guests Andrew Light and Nick Blunden Global Managing Director and Publisher of The Economist online discuss the rapid changes to content in the digital space and what businesses need to do in order to keep pace.

Episode 46 transcript:

Voiceover: Welcome to Strategy Talks, the business podcast series from PwC Canada. Hosted by Helen Mallovy Hicks, National Leader of PwC’s dispute analysis in Valuations Practice; and Calum Semple, an operations in consulting partner. This interview series featuring new topics and guest every episode is designed to give you valuable insight into some of today’s hottest issues affecting your business.

Vanessa: Today consumers interact with companies through wide range of digital technologies including virtual offices, video on demand, smart phones, cloud computing and social networking. This environment of constant disruption and opportunity will have a dramatic impact on your marketing, your business processes and your customer relationships. Can your business compete?

Vanessa: Before we get into the details, perhaps you can give our listeners a brief overview of what digital transformation actually is.

Andrew: So, the area we want to focus on today is how that digital transformation is affected in a marketing capacity. So what that means for businesses whether they are marketing to consumers or whether they are marketing to other businesses. Our point is that it really affects everybody and every organization really needs to listen to what those changes are going to be because it will have a radical transformation effect on whatever your business happens to be.

Vanessa: Great, well you’ve mentioned consumers, what are the consumers led changes and are prices need to embrace in order to digital marketing initiatives?

Andrew: The big changes that we are seeing is consumers wanting content that they desire where they want it and when they want it, and they want it on whatever platform they desire as well. That’s a massive shift from what has happened before. So, even if we take the old world of booking a prime TV slot at 8 o’clock on a Saturday night, that model doesn’t exist anymore because people will be watching that content when they want, where they want, on whatever device they want.

Therefore this affects the advertisers on what messages they can be sending, and really affects the detailed information you need to have about your consumers; who they are and where they are consuming it. In business capacity this happens as well; People at work aren’t necessarily receiving messages at the same time and the same place as they were before.

Different devices and people are even bringing their own devices to work where two or three years ago that would have been unthinkable. Now the IT department has to get used to the idea that people are going to bring their own devices from home, and your IT department is going to have to make sure that it can actually deal with those devices in the way that is acceptable to the organization.

Vanessa: So marketing just isn’t about pushing something out using one channel and waiting; sounds like that is what you are saying. Nick, what’s your experience and prospective on that?

Nick: I agree, I think that’s a very fundamental shift in the way that the advertising in marketing mobile works. I think now increasingly consumers are pulling commercial messages to themselves, rather than waiting for brands or business to push the brands towards them. I think as the result, brands and businesses need to think much more carefully about their marketing function and start to think of themselves as content producers rather than just advertisements.

Vanessa: Interesting, so there is a bit of a two way conversation, anyways.

Nick: Yeah, I think in that context consumers are increasingly active not just passive. They become amplifies of messages, which can be both a huge opportunity and something of a threat to the businesses that project those messages, and I think influence to some degree being democratised.

Vanessa: Interesting. So, Andrew clearly this change is very significant, for businesses that are putting together digital marketing budgets for the next few years. What should they be thinking of, and what does this mean?

Andrew: Well, if we take a look at PwC’s Entertainment and Media Outlook, we’ve got some projections in there for the amount of digital marketing spend that’s then projecting to increase from 2 billion dollars in 2011 to 4 billion dollars in 2015.

The doubling of a marketing budget of this size needs managing; it’s an enormous shift, and when you actually take into account the fact that that change also means that people are moving that budget because it’s more effective online than it would be offline, that means that the amount of effort that is going into it so the return you getting on your dollars, the reason you are putting your dollars in there is because you getting better returns.

The amount of effort that’s going into it, whether that is in terms of resources, people, understanding of technologies of the processes in the organization even within a marketing department, or the rest of the organization as well, that is a massive shift. We really feel that whether it’s the agencies that are managing that money, whether it’s the advertisers who are spending it, or whether it’s media that is playing those ads or is taking that marketing to market, all of them need to manage that change and not be complaisant to think that it can just organically change within an organization from the way it is today.

Vanessa: So, two to four billion dollars, is that net-new spend?

Andrew: A lot of it is shifting from what would be “on” to what we would called traditional “offline” media. The reason for the change is that it’s more effective, people are able to measure more effectively and get down to more granular level in terms of understanding their consumers and therefore directing relevant messages to relevant audiences at the time and place that people want to be receiving these messages because you get the right offers that are targeted directly to you.

Vanessa: And Nick, as Managing Director in the online division, are you seeing these types of changes already taking shape? If so, what’s your perspective?

Nick: Yes, and we certainly are. Each market needs to be treated differently, but I think it’s illustrative to look at how this has played out in another markets. For example, in the UK market which I’m very familiar with, the shift to digital I think is taking place very rapidly. 24% of all advertising spent in the UK is now online, and if you think that 25% of advertising spend is on TV, it’s the second biggest and almost equal channel in terms of marketing or advertising.

This has had quite dramatic effects in the UK market, for example. It’s not just in my mind about a channel switch moving money from one channel to another, it’s about minds that shift. As Andrew talked about the measurability of digitally something that makes it extremely attractive, but the capabilities and models that work in digital are quite different from the ones that work in other broadcast channels. One thing I would take count of the experience we see with our clients and our agencies particularly in the UK market or indeed in the US market is that you can no longer afford when digital spend becomes such an important part of your overall marketing spend, to treat it like a silo. You can’t afford to have a digital marketing strategy as distinct from your overall marketing strategy; they have to become one and the same.

Vanessa: Interesting, and how has your organization adapted?

Nick: It’s been a challenge for mass as a media runner; obviously the economics of digital are very different from economics of print and one of the things we’ve had to do is invest very heavily in new capabilities both in terms of bringing new people into the organization, but also in training existing people to understand the idiosyncrasies of the digital world.

Vanessa: Interesting, so it’s not just about a new department off on their own, this is about changing the marketing department entirely?

Nick: I think the marketing department and a cultural change across the whole business, so in our very specific type of business that includes not just educating marketers but also our journalists and our editors about the opportunities that digital brings.

Vanessa: Good, Andrew I think that’s what you were getting to in your earlier comments, and one of Nick’s comments some a moment ago was about measurement tools. What’s your view on measurement tools, and the effectiveness of measurement tools?

Andrew: Absolutely, that’s very much a Holy Grail of the marketing department; how you actually measure the effectiveness, where those dollars are going and what return you are seeing from it. The truth is with digital that it is much more measurable but it’s not that 100% measurable. So if somebody advertises somewhere even on your smart phone and somebody walks into your store as a result of that, there is a potential to be able to do one to one direct correlation, and it’s just really important to have the right measurement tools in place to be able to cope with a new digital world.

Also a new digital consumer in particular on the consumers side, to be able to measure that effectiveness, and also to next point as well: I think there are a couple of areas, things that typically fit within marketing that actually from a digital capacity now affect across the organization. Pricing being one example, we’ve done work with a number of clients in terms of pricing, because that affects not just what the consumer sees, but it sees the whole finance department, legal department, your accounting and therefore it’s crosses across the organization.

Therefore exactly as Nick says you can’t just have a digital strategy, especially on the marketing side when they made up such a small part of what it was you were going to do, it was okay to have a different little silo that could actually cope with it and see how it went but now it’s becoming much much more mainstream and will be within the next three to four years. It is going to be the mainstream part of the organization and when it gets to affecting what price you charge to your consumer for whatever offers they are going to receive, that affects the whole organization’s net profitability and your whole existence then depends upon whatever you do, and therefore measurement lies right at the heart of all of it.

Vanessa: So, digital marking is really an issue that the C-suite should be tackling. Is that what I’m hearing from both camps here?

Nick: Absolutely has to be on the C-suite.

Vanessa: I’m going switch gears a little bit; we keep hearing this is a year of mobile, now for those of us who are not up to speed perhaps you can shed some light on what that means, and is it true?

Nick: Well, the promise of mobile has always been that we will have millions of people with smart phones and that’s a one to one device that’s attached to them more than a wallet or a set of keys. It does have that potential, I do think that this is a year of mobile and been hearing that ever since 2006 – 2007, the advent of the iPhone. In truth the real question should be what’s happening in mobile this year, and I really think we are seeing a dramatic shift change and in fact, the same PwC Outlook of if when looking at the projection for mobile marketing spent over the next 4 to 5 years it’s over 50% year on year growth in marketing amount.

That’s absolutely huge, but it’s still less than 8% of the total, so we need to get it in context. It’s a massive shift, and the real promise there of course is to be able to target you as you walk down the street; know who you are where you are, and is it directly relevant offer for you based on knowing who you are and where you are, and therefore it can be that much more attractive for advertisers to be able to reach you. However the idea that’s going to be the overall encompassing answer to everybody’s promises is something that if I don’t think is quite true.

Vanessa: Nick, what’s your experience at The Eeconomist with mobile?

Nick: We’re seeing a huge growth to Andrew’s point actually in a number of people accessing our services on our contempt over mobile. What’s interesting now is that we try and look at it not so much in the context of just mobile where there is inference that we are talking about a handset, but thinking about it in the context of mobility. When I look at the table and look at the devices in front of me for example, it’s both a mobile handset but there is an Ipad as a mobile device, there is a laptop as a mobile device, so I think WiFi all the spread of WiFi, the spread of just mobile devices or handsets. In that context, we like media runners or brand owners are having to think about four things that are very specific in the context of mobile: location, context, immediacy, and sociability. After all, mobile devices, particularly a handset for example, is as much a communication device as is a marketing tool, and that ability all that inherence socialist in it, is a platform I think is a huge opportunity.

Vanessa: Interesting. Talking about pushing content out to mobile and perhaps having a twoway conversation. I do have a question about the content: In this type of environment when you need something right away, quickly and on a mobile device, how does that impact your ability to deliver content that’s to a high journalistic standard?

Nick: Yeah, I think we don’t necessarily think of it specifically in those terms as a high quality media runner. We would say that we have an obligation to provide the highest possible quality of content, however, whenever and wherever you choose to consume it. Clearly there is a slightly different user behaviour often being demonstrated by somebody using mobile. It tends to be more story specific from our perspective; person accessing our content via mobile is often looking for something specific rather than browsing, and that is fundamental. There is a difference in the form factor. We try and make our content optimized to the device that it’s being delivered to; so if you accessing our content through a mobile device whether it’s a smart phone or a lesser function phone, then we optimize the content to that device, but the underlying quality or integrity of it should be the same whether it’s print, a digital addition, mobile, laptop, Ipad, whatever.

Vanessa: Interesting, well I’m glad to hear that. So mobile marketing is something that all organizations should clearly be considering, but how do you go about introducing digital marketing into an organization? Perhaps Andrew you can start us off by highlighting PwC’s digital transformation and digital readiness approach.

Andrew: The digital readiness assessment is something that we’ve developed in the last few months; it’ a survey at a top level 50 very straight forward questions for executives to give us their feedback on where they feel they are on the digital journey: how much of their revenue is coming from digital means, and how prepared their staff are. We’ve had over a 1,000 surveys back either through online or through different conferences we’ve had. Probably the most interesting thing to come out of all of that feedback is that the biggest issue we weren’t really expecting is access to talent. It always seems to come back to: “It’s people who run businesses, not machines and not processes” all those things have to fit after the fact that you’ve got the right people in place. That’s the biggest thing that’s concerning people, is how you get access to the right talent, or how do you retrain the existing work force. How do you get access to the right people for a next phase, and how to get your training programs, your education and then deal with the efficiencies that if you aren’t using them, your competitors will be. I think, for us that was the largest surprises that came out from there, and again it’s a self perception; so our digital readiness assessment is something that you complete, we do the assessment, and then if you want to, we will work within the organization to actually look at how you actually compare with either your competitors, or the rest of your organization as a whole, or whoever you want to benchmark against. Then we try and draw out where you are against everybody that happens to be on that journey and then clearly what is the action plan; what actions do you really need to take and in what particular order.

Vanessa: Fascinating, Nick from your practical experience what was the implementation of a digital marketing initiative, if you like?

Nick: The whole concept of change in digital transformation is a fascinating. I worked in business that’s been existent of nearly 180 years and turning that business from one that has been entirely focused on print and analog channels, to a business that is at least as interested in digital has proven to be a long journey. I think that’s the first thing to point out is that this stuff doesn’t happen overnight. You can infuse an organization with capabilities but the much bigger shift is a cultural one; and certainly as a business we have had to become more transparent, more agile and I would say more interesting; and certainly more responsive as a results of this transformation that we’ve gone through. If I had to summarize that, I would say for us and for most businesses regardless of sector, it’s no longer enough to just be customer focused. I think most businesses would say that they’re customer focused, but so much power has moved from the organization to the consumer that you almost have to be consumer obsessed.

Vanessa: Consumer obsessed? Fascinating, can you expand on what that means?

Nick: I think that fundamentally we have to start to think of what we do. Take marketing for example: In my experience, marketing to some degree is sort of an end of itself. Actually marketing is just a means: a means to get closer to your end customer, and I think digital is the fascinating part of it. The real opportunity is the ability to understand your customers better, respond to them much more quickly, and take the fact that they now have as much power as you do in the relationship as a chance to build a longer and more valuable relationships with them.

Vanessa: Great, so digital is here to stay it sounds like.

Nick: Absolutely.

Vanessa: This is not just a passing fad. Is this the end of paper? Do I have look forward to not having my Economist print edition any longer?

Nick: What we think absolutely fundamental to this is that we will continue to live in a multichannel world. Digital is absolutely critical but it’s not the only media channel that people consume. We’ll only have to look at the success of things like XFactor and American Idol to see that millions and millions of people still want to consume that content in formats like TV; so The Economist we will continue to produce a print edition. Actually our research shows that as you give people more devices through which to consume that content, not only do they necessarily consume it through those additional devices, but they consume more of your content overall. That may sound like a great opportunity.

Vanessa: Definitely.

Andrew: And I think it goes to the different ways that people will consume information, whereas previously you would read a manual to figure out how your home phone works, now you go on YouTube and you can find out in two minutes because you consume it via a video that tells you, and it’s much quicker and much faster for you to actually be able to solve your problems; I think the way we consume content will change radically as well.

Vanessa: Fabulous, this is really an omni-media world. Thank you Andrew and Nick for joining us today. For more information on digital transformation, or to take our digital readiness assessment, please visit our webpage at pwc.com/ca/digitaltransformation.

This concludes this episode of Strategy Talks. Thank you for listening. We hope you’ll join us again soon for another episode. To download or subscribe to this podcast series, or to find more information, please visit pwc.com/ca/strategytalks. The information in this podcast is provided with the understanding that the authors and publishers are not herein engaged in rendering legal accounting, tax, or other professional advice or services. The audience should discuss with professional advisors how the information may apply to their specific situation. Copyright 2009, PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP, an Ontario Limited Liability Partnership, or, as the context requires, the PricewaterhouseCoopers global network, or other member firms of the network, each of which is a separate and independent legal entity.

Hosted by Helen Mallovy Hicks, a Partner and National Leader of the Dispute Analysis & Valuations Group, and Calum Semple, a Partner in the Operations and Consulting practice, Strategy Talks is a series of audio podcasts that explore key issues affecting businesses in Canada, and share strategies that companies can use to help address them.